Summary and Highlights
Second Quarter 2004

Jobs held by residents grew in the Hudson Valley by .3%, with a mixed
pattern across counties. The labor force expanded more rapidly (or
shrank more slowly) so that unemployment rates went up across the region.
The regional unemployment rate was 4.4% for the second quarter, with a
high of 5.84% in Greene and a low of 3.43% in Putnam.

The differential unemployment rate in the City of Poughkeepsie
improved relative to the Dutchess County average, while the ratio of the
City of Newburgh relative to Orange County worsened.

Jobs located in the region expanded more rapidly, with a gain of
1.5% overall. Manufacturing and information sector continued to
contract, while there were gains in tourism, finance, and business services.

Home sales expanded in the region by 26%, more rapidly than New
York City and New York State. The only quarterly declines were in
Sullivan County. The average selling price rose throughout the region,
with gains of 14% overall. Median selling price also increased in all
counties.

The average number of construction permits for the region
increased by 5.6%, with a mixed pattern across the counties.

The number of visitors taking tours at the Roosevelt/Vanderbilt
sites increased by 7.2% overall from year ago levels.

Sales tax collections increased by 16.7%, with gains in all
counties. These increased revenues were partly due to increases in tax
rates.

Bankruptcies increased dramatically in the southern district,
particularly in Chapter 11 filings, which increased by tenfold from the
same quarter one year ago. This pattern was not matched elsewhere in
New York State or the U.S.

Inflation in the New York/New Jersey Metropolitan Area increased
relative to the average for all U.S. cities, in the second quarter,
2004.

Transfer payments expenditures increased overall for the region in
the first quarter, the last period for which data is available, while
there was a mixed pattern in the number of recipients.

Special Focus

There is little evidence to suggest that there has been a "September
11 effect" in the population and migration patterns within the Hudson
Valley and New York City. The greatest change in the regional pattern was
a decline in the population growth rate in New York City metro area after
the stock market "bubble" burst in March, 2000. The city and
suburbs both continued to expand in population, but at a slower rate after
2000. Further, the suburbs grew more rapidly than the City after 2000,
reversing the trend of the late 1990s of faster population growth in New
York City.

There is a complex pattern of cross-migration within the region,
according to IRS data.
Considering migration trends within the New York/New Jersey Metropolitan
Area, the Hudson Valley region tends to gain population relative to New
York City and Long Island, and lose population to Connecticut,
Pennsylvania, and New Jersey.

The peak net in-migration from New York City into the Hudson Valley was
5,658 returns in 2001. The 2003 net inflow was 5,197, a slight decline.
Considering the entire metropolitan area, the peak in the net
in-migration
into the Hudson Valley from the New York/New Jersey Metropolitan area was
4,571 returns in 2002, with a slight decline in 2003 to 3,810.

Considering migration between the Hudson Valley and the entire United
States, there has been a consistent net out migration, with a declining
net population outflow over the period 1996 to 2003. The only county with
a positive gain in both years 2002 and 2003 was Orange County.

According the income distribution data from the American Community Survey
for 2003, Dutchess County had a higher proportion of middle class
households than the average for other counties in the region, New York
City, and New York State. Westchester County had a higher proportion of
household and families with incomes over $200,000 than the comparison
areas. Poverty rates for New York City exceeds the counties in the Hudson
Valley and other ten largest metropolitan areas in the U.S.

Prospects

The Hudson Valley continues to have job growth located in the region, and
steady positive in-migration from New York City and Long Island. Job
growth in tourism and professional and business services, health and
education continue to offset declines in manufacturing and information
sectors. Home sales have continued to increase, even in the climate of
increasing mortgage rates. Poverty rates are relatively low, with a large
middle class, and relatively high income levels, compared with other
areas.

The near term prospects look positive for the region, to continue to
expand at the rate of 1% employment.

National Review - Second Quarter 2004

The growth of GDP in the second quarter was 2.8%, a decline from the 4.5%
growth rate of the first quarter. While personal consumption
expenditures slowed considerably, other sectors of the economy showed
strength.

Personal consumption expenditures increased by 1.6%, compared with 4.1%
in the first quarter, the slowest rate of growth since second quarter,
2001. Expenditures on durable goods didn't increase at all. Gross
domestic investment grew by 17.3%, with a rise of investment of 13.6% in
equipment and software. Residential investment grew by 14.7%, aided by
continuing low interest rates, as consumers rush to lock in rates before
the projected increases by the Federal Reserve bank.

Exports declined from first quarter rates of growth, while imports
increased, worsening the trade deficit. Government spending grew by
2.4%, while defense spending slowed to a growth rate of 1.9%. State and local
spending increased by 2.2%.

Inflation, as measured by the implicit price deflator, increased by 3.2%,
the fastest increase since first quarter, 2001.

Corporate profits slowed compared with the previous quarter to .1%, while
the gain was 18.3% over one year ago. In the second quarter, 2004, 84%
of the total profits were earned in domestic industries, where the
increase over the previous quarter was 25.1%. Profits in domestic
financial industries, one third of the total, declined while profits in
nonfinancial industries, two thirds of the total, increased. Profits
earned in the rest of the world decline by 23.5%, following a decline in
the first quarter, as well.

Productivity

Productivity growth of the nonfarm business sector increased by 4.6% from
one year ago. This growth rate was lower than the first quarter's gain
of 5.6%, and faster than the annual averages of 4.4% for both 2002 and 2003.

Productivity in the manufacturing sector increased by 5.8% from year ago
levels, faster than the first quarter gain of 4.8%. The second quarter
returns to the usual case, in which productivity growth in manufacturing
exceeds the nonfarm business sector, whereas first quarter, 2004, was the
exception to this usual pattern.

Employment Cost Index

The year-over-year growth in employment costs increased by 3.9% in the
third quarter, up slightly from 2003. While wages and salaries have
slowed to an increase of 2.5%, benefit costs continue to escalate at a
rate of 7.2%. This rate of benefit cost increase is the highest since
the early 1980s, even exceeding the rate of growth from the early 1990s. The
growth in the wage and salaries component is the slowest since second
quarter, 2000.

Home mortgages are now the largest category of consumer debt outstanding,
although the delinquency rate of residential real estate loans has
remained stable.

Oil prices reached nearly $50 per barrel in mid-August, partly due to the
threat of lower production in Iraq, Venezuela, and Russia, but also due
to the entry of banks and hedge funds in oil price futures trading.

The stock market reached a six week high of 10,195 at the end of August,
2004. This was an almost 4% increase from the nine month low of 9,814.59
on August 12, 2004, down from the three year high of 10,737.7 in
February, 2004. These ranges are still considerably below the peak of 11,700 in the
pre-recession peak of 2000. With uncertainties regarding oil prices, the
reconstruction in Iraq, terrorist attacks in Russia, and the election,
the volume on the New York Stock Exchange was also lower than average, trading
at less than one billion shares per day.

Based on newly released demographic information from the Census Bureau,
the share of the households with income between $25,000 and $75,000, in
2003 dollars, declined from 51.9% in 1980 to 44.9% in 2003.

Hudson Valley Review

Employment and Earnings

Place of Residence

The jobs held by residents in the Hudson Valley increased by .31% in the
second quarter, from one year ago. There were gains in all counties
except Greene and Westchester, which experienced small declines. The
most rapid growth rates were in Putnam and Sullivan counties.

The labor force increased in the region by two thirds of one percent,
with losses in Westchester and Greene counties. The most rapid increases were
in Putnam and Sullivan.

Because the labor force increased faster than the number of jobs (or
decreased more slowly, in the case of Westchester and Greene), the
unemployment rate increased for the region. The regional average was
4.44% in the second quarter, 2004, up from 4.08% one year ago. The
unemployment rate increased in every county, with the highest level
in Greene, at 5.84%, followed by Sullivan and Orange, with rates exceeding 5%. The
lowest unemployment rate was in Putnam, at 3.43%. The unemployment rates
for New York City and New York State both declined, but remained at
higher levels than the region.

The unemployment rate in select cities remained higher than the
respective county average. In the case of Newburgh, the unemployment
rate of 10.7% is now double the rate of Orange County, at 5.1%. That
city/county differential remains the highest for the region.

Place of Work

Jobs located in the region grew more strongly, expanding by 1.5% from one
year ago. The sectors with the largest growth were tourism and finance,
with gains in the range of 3%. Also experiencing strong growth were the
sectors of professional and business services, education and health, and
transportation and public utilities, each exceeding 2%. The manufacturing
and information sectors continued to decline.

There were employment gains in each county except for Greene. The
largest gains were in Putnam and Sullivan counties, with growth rates
over 3% for the quarter.

The growth rate of the Hudson Valley region exceeded Albany, New York
City, and New York State, all with growth rates of less than 1%.

Home Sales and Prices

Homes sales increased by 26% in the second quarter, 2004, with gains in
all counties except Sullivan. The average and median sales prices
increased in all counties, most rapidly in Columbia County. The average
price of homes sold ranges across the region from the low of $147,352 in
Greene County to a high of $847,393 in Westchester County.

Building Permits for residential construction increased by nearly 6% in
the second quarter, compared with year-ago levels. Within this regional
average, there was a mixed pattern, with large increases in Greene and
Sullivan, and significant decreases in Putnam and Rockland.

Tourism

Visitors taking tours increased in the second quarter from year-ago
levels. For the three sites in Hyde Park, the overall increase was 7%,
with increases for Vanderbilt and declines for the Eleanor Roosevelt
site. Total visitation, including tours and grounds, increased by 10%
from one year ago.

Air Traffic

Passenger traffic at Stewart Airport increased dramatically from the
second quarter, 2003, due to new carrier service at the airport. The
second quarter average enplane and deplane rates of roughly 21,000 is
still roughly half of the previous peak of 40,000 in reached in late
1997.

Air cargo declined slightly from the second quarter one year ago,
especially enplaned cargo, which declined by over 7%.

Sales Tax Revenue

Partly due to the statewide increase in sales taxes, effective June 1,
2003, the sales tax collections increased for the region by 16.66%.
There were significant increases in all counties. The largest increases
were in Dutchess and Sullivan, with Dutchess proceeds also affected by an
increase in rate.

Bankruptcy

There was a dramatic increase in business bankruptcy filings in the
southern district, which includes Dutchess, Orange, Putnam, Rockland,
Sullivan, and Westchester, as well as New York City.

The tenfold increase in business bankruptcy filings for the southern
district was unmatched anywhere else in the state. New York State filings
as a whole increased by nearly 20%, while there was a slight decline for
the U.S. as a whole.

Inflation

After a period of lower inflation in 2000, the New York/New Jersey
Metropolitan Area has continued to have faster inflation than the average
for all U.S. cities. This pattern has persisted since 2002, and appears
to be accelerating in 2003 and 2004. For the second quarter, 2004, the
New York/New Jersey Metropolitan Area had an average inflation rate of 4%,
higher then the average for all U.S. cities, as well as the recent
history for the metropolitan area, as well, in spite of relatively high
unemployment rates.

Transfer Payments

The total number of recipients of assistance for needy families decreased
for the first quarter, 2004, the most recent period for which data is
available. The number of recipients which relied on the New York State
Safety Net program, with less restrictive eligibility than the national
program, increased. There was a mixed pattern across the counties,
however. Columbia, Dutchess, Greene, and Sullivan had increases in the
total number of recipients, whereas the remainder of the counties showed
declines.

The expenditures for needy families increased for the region, in spite of
the decline in the number of recipients. The expenditures increased for
most categories for most counties, except for declines in Greene, Putnam,
and Ulster.

The other transfer programs, including food stamps and supplemental
security income, had increases in both recipients and expenditures.

Special Focus

Migration Trends in the Hudson Valley and New York/New Jersey
Metropolitan Area

The pattern of migration into the counties of the Hudson Valley from 1996
to 2003 is instructive. There is a complex pattern of cross-commuting,
with migrants from New York City to the south and Albany to the north,
coming into the region. There is also significant movement within the
region.

Examining in detail the migration to and from the New York/New Jersey
Metropolitan Area, most of the in-migration to the Hudson Valley come
from New York city, at 68% of the total in 2003. Other major flows are from
Connecticut, 7%, and New Jersey, 14.7%, as well as Columbia and Greene
counties (1.7%). The increase from New York City proper was 11.4% over
the period, reaching a peak in 2001. The in-migration from New Jersey
increased faster, at 15.7%, while Connecticut grew more slowly, at 3.5%.
There is also a significant out-migration from the Hudson Valley to the
larger metropolitan area. Half of the outflow went to New York City,
with 18% each to New Jersey and to Connecticut. The total outflow over the
period from 1996 to 2003 increased by 14.4%, with the most rapid increase
to Columbia and Greene counties, to New York City, and to Connecticut.

The net migration into the Hudson Valley region was roughly stable from
1996 to 2003. There is a consistent pattern of net in-migration to the
Hudson Valley from New York City and Long Island, and a net outflow to
Connecticut, New Jersey, and Pennsylvania.

Considering county by county:

The largest migration into Columbia County is from Albany and Rensselaer
counties to the north and New York County to the south.

Migration into Dutchess County comes from many directions: from New York
City (Bronx, Queens, Kings, New York counties) and Long Island (Nassau
County); and from Orange, Putnam, Columbia, Ulster, and Westchester
counties within the region.

Migration into Greene County comes from Albany to the north and Ulster
from the south.

Migration into Orange County from New York City (Bronx, Queens, Kings,
New York counties) and Long Island (Nassau and Suffolk counties), and from
elsewhere in the region (Dutchess, Rockland, Sullivan, Ulster, and
Westchester counties).

Migration into Putnam County comes from New York City (Bronx and New York
counties) as well as within the region (Dutchess and Westchester
counties).

Migration into Rockland County comes from New York City (Bronx, Kings,
New York, Queens) and within the region (Orange and Westchester counties).

Migration into Sullivan County comes from New York City (Kings and New
York counties) and within the region (Orange and Ulster counties).

Migration into Ulster County comes from New York City (Kings and New York
counties) and within the region (Dutchess and Orange counties).

Migration into Westchester County comes from New York City (Bronx, Kings,
Queens, New York counties) and Long Island (Nassau and Suffolk counties),
as well as within the region (Dutchess, Putnam, Rockland counties).

All counties in the region also receive migration from different states.

The net migration into the Hudson Valley from the New York/New Jersey
Metropolitan area has remained roughly constant from 1996 to 2003, with a
peak in 2001.

The net migration into the Hudson Valley from elsewhere in New York State
and the U.S. has remained negative over this period, with a net outflow
of 6,896 in 1996 falling to a net outflow of 3,521 in 2003. Only Orange
County has had a positive net inflow in both 2002 and 2003.

New York/New Jersey Metropolitan Area Population Trends

There has been some discussion of a post 9/11 effect in the New York/New
Jersey Metropolitan Area. While it is true that the most rapid
population increase in the New York Metro area was in the last years of the 1990s
boom, particularly in 1998 and 1999, the metro area has continued to grow
after the bubble burst, and after the 9/11 attacks. The New York/New
Jersey Metropolitan area population grew by 3% over the decade of the
1990s, just ahead of Philadelphia, but slower than the other major
metropolitan areas in the U.S. From 2000 to 2003, the New York Metro
area has grown by 2%, faster than Detroit, Philadelphia, and Boston, but
slower than Dallas, Houston, Washington, D.C., as well as Los Angeles and
Miami. New York Metro area remains the largest in the country, followed
by Los Angeles and Chicago.

While New York City has continued to grow, it is true that the suburban
fringe surrounding the city has grown faster, since 2000. The growth in
New York City slowed after 1999, a year earlier than the suburban fringe.
Among the state quadrants in the "tri-state" metropolitan area
surrounding New York City, the growth rates of New York and New Jersey
suburbs slowed after 2000, while Connecticut and Pennsylvania remained
steady and even expanded, respectively.

Comparing different counties in the suburban fringe, within the Hudson
Valley portion, the fastest growing counties between 2000 and 2003 were
Orange, Dutchess, and Putnam counties, at 5.9% and 3.6% respectively.
Elsewhere in the region, Pike County, Pennsylvania, as well as Ocean and
Warren counties in New Jersey grew faster, over this period, by 11.8%,
6.3%, and 6.1% respectively.

Income Distribution

Data on income distribution from 2003 is available from the American
Community Surveys for selected areas. Comparing cities and counties for
which data is available, Dutchess County has a higher share of middle
class than New York City, New York State, and the U.S., as measured by
the share of households with incomes between $25,000 and $75,000. Westchester
County has a higher share of households with incomes greater than
$200,000 than New York City, New York State, and the U.S.

Compared with other counties and metropolitan areas, New York City has
the highest share of poverty, and Dutchess County the lowest in the region.

Sources: Federal Reserve Bank of Cleveland; Wall Street Journal, New York
Times, Business Week, U.S. Department of Commerce, U.S. Department of
Labor, U.S. Internal Revenue Service, New York State Department of Labor,
New York State Department of Taxation and Finance, New York State
Association of Realtors, National Park Service, Stewart Airport,
Westchester County Airport.